21 Jun 2026 · Chirag Asnani

How we grade risk on a research note

Low, Medium and High are not moods. Each rating on our notes is assigned by a rule, and the rule is worth stating so you can weigh it yourself.

The inputs

We combine the volatility of the underlying, the width of our own valuation confidence band, and the liquidity of the instrument. A cheap-looking stock that is thinly traded and hard to value is not a low-risk idea, however attractive the target.

Figure 1 — the risk grid we score against

Where the rule breaks down

It struggles around binary events — a pending order, a regulatory verdict — where risk is not a smooth distribution but a coin flip. In those cases we say so in words rather than hide behind a grade.

Disclosure — No security recommendation. Describes our own method. This article is for information and education only and does not constitute personalised advice. Investments in securities are subject to market risk; no returns are assured.